Last week, Minnesota Citizens for the Arts released the Creative Minnesota study. This study, made possible with support from The McKnight Foundation, takes a look at the big contributions the nonprofit arts and culture sector makes to Minnesota’s economy.

Among the big findings:

The arts generate $1.2 billion in total economic impact in Minnesota annually.

Almost 19 million people attend arts and culture events every year.

Arts and culture support the equivalent of more than 33,000 full time jobs.

These jobs generate over $870 million in income to Minnesota residents.

There are more than 42,000 artists in Minnesota.

The study profiles 11 Minnesota regions, finding significant economic impact in each. Of the 1,269 organizations studied, almost half are located in Greater Minnesota.

It also found significant growth in the sector since the previous study conducted in 2006.

Sheila Smith, executive director of Minnesota Citizens for the Arts, put it this way: “It is a testament to how much Minnesotans care about arts and culture that, although Minnesota is just now crawling out of the Great Recession, the nonprofit arts and culture sector seems to have shown resilience and even growth in this period.”

Visit the Creative Minnesota website to download the report, read more about the 11 regions profiled, and view several handy infographics that sum up the data in an easily accessible way.

Examining the experiences of eight organizations participating in this leadership and strategy development program, this report identifies four capacities that have helped organizations in Minnesota and North Dakota thrive in the face of operational challenges, staffing and leadership changes, and shifts in funding. Key takeaways offer insights for similar organizations seeking to build their resiliency and for grantmakers supporting the arts and culture sector. The report also outlines key insights for grantmakers supporting the arts and culture sector.

ArtsLab is a training, mentorship, and support program that offers in-depth learning opportunities for community-based arts organizations. Designed to catalyze new ideas and craft tangible paths to strategic change, the program offers highly-participatory retreats, monthly webinars, and access to mentors and financial support. Since its inception in 1999, the program has helped artists, cultural leaders, and their organizations strengthen operations, build cross-sector relationships, develop leadership skills, and deepen their connections to their communities.

“This report helps ensure that the impact of Arts Midwest’s ArtsLab program will reverberate beyond the organizations and individuals it served over the last 15 years. We are proud to support ArtsLab because it is truly a testament to the power of leveraging art to think bigger and think differently about what is possible in our communities,” says Allison Barmann, strategy and learning vice president at Bush Foundation.

In 2008, Grantmakers in the Arts (GIA), Technical Development Corporation (TDC) and Nonprofit Finance Fund began leading discussion and research around capitalization and arts organizations. In 2012, MCF hosted a one-day workshop on the topic, and on Dec. 3, 2013, MCF presented a follow-up to fifty staff members of arts grantmakers and arts organizations alike at the McKnight Foundation. Here’s a recap.

Kate Barr, executive director of Nonprofits Assistance Fund, facilitated a mix of presentation and discussion to help participants gain a common understanding of the capitalization of arts organizations. Barr recapped the 2012 workshop by providing definitions of different types of capital, the role and purpose of each and how each fits into an organization’s business model.

All organizations need operating revenue and working capital. Most organizations need mission-appropriate fixed assets, operating reserves and risk/change capital. And some organizations need building and building reserves and endowments.

Healthy capital versus weak capitalHealthy capital should evolve with an organization’s current needs, while weak capital is universally destabilizing to an organization. Barr walked the group through reading a balance sheet. She provided clear tools and formulas to help understand if an organization has healthy capital or not. These included the Unrestricted Net Assets Tool (Instructions on the Unrestricted Net Assets Tool here) and the Days of Cash on Hand Tool.

Barr advocated for strategic plans that include a 4 to 5 year capitalization plan. This would include clearly assessing and understanding the starting point and determining the needs and potential sources. It is critical that boards are provided with education, so they can read and understand balance sheets and other financial documents.

Capitalization obstaclesThe top six obstacles to capitalization are:

Knowledge

Planning

Best practices

Leadership

Financial standards

Access to capital

How can funders advance financial health?Cindy Gehrig, president, Jerome Foundation, and Vickie Benson, arts program director, The McKnight Foundation, shared their thoughts on what funders can do to advance financial health and strong capitalization. Key points included:

Funders are learners too, just like nonprofits, and it is important to learn together

The importance of understanding the story behind the numbers

The grantmaking sector is and will continue to move away from penalizing nonprofits for having operating reserves

Weak capitalization results in arts organizations that are risk-adverse and play it safe. Strong capitalization makes an organization healthier and more willing to take creative risks.

The Cultural Data Project (CDP) — now in use by 7 Minnesota-based funders and 200 Minnesota arts and culture organizations — can lead to better arts organizations. In addition, use of the CDP can help foundations and corporate giving programs streamline their grantmaking and help nonprofits better understand their programmatic and financial health.

When the CDP launched in Minnesota on June 1, 2012, MCF members The McKnight Foundation and Target were the first two Minnesota-based funders to require that grantees enter data in the CDP.

Their early and enthusiastic support has resulted in data collection from several hundred arts organizations in less than a year. And, naturally the more funders that require grantseekers to use CDP, the richer the database and its usefulness for grantmakers, grantseekers and arts advocates.

While writing an article for the spring issue of Giving Forum, online now and in your mailbox soon, I was surprised by one example of CDP data use from Michigan.

The Minneapolis Creative Index 2013 visually showcases the strength of the local arts community.

The Arts, Culture and Creative Economy program for the City of Minneapolis has released a new study using the Creative Vitality Index (CVI), commissioned by the city and developed by Western States Arts Federation (WESTAF). CVI is designed to capture the impact of the creative community in Minneapolis and the Minneapolis Metropolitan Statistical Area (MSA) and to measure annual changes in the economic health of highly creative industries.

This system of measurement will provide a new resource for policymakers, arts professionals, artists and community arts advocates. Grantmakers may utilize the index to provide a more in-depth analysis of Minneapolis’ creative sector, including measuring the city’s creative employment by ZIP code. This will allow grantmakers to focus funding on the specific needs of the creative community in their target geographic areas.

According to the Minneapolis Creative Index 2013 report, the economic impact of the Minneapolis creative community on the economy is large, accounting for 1% of the overall retail economy and posting performing arts revenues almost ten times the national average.

On average, the MSA creative sector injects $700 million into the Minnesota economy each year. By comparison, this is approximately 70% of Minneapolis’ sports sector revenue without the benefit of publicly subsidized stadiums. Arts patrons spend on average an additional $20.40 per person on event-related purchases like parking and food.

The creative sector has also been crucial to Minneapolis’ job growth, employing nearly 20,000 residents, or about 5% of all jobs in the city. Creative employment in the MSA represents 74% of Minnesota’s creative occupations, the sixth highest CVI score in the country.

The report also detailed the effects of the creative sector on Minneapolis’ nonprofit community and the greater creative arts ecosystem. Despite recent losses in overall nonprofit revenue, contributions to nonprofit arts organizations increased 10% over the two year period ending in 2011. Increased revenue from the Clean Water, Land and Legacy Amendment also fueled growth in the nonprofit arts community. The amendment specified that 19.75% of $7.5 billion dollars to be generated statewide over the next 25 years will go to fund arts and cultural activities.

Although the new CVI measurement system has proven to be a valuable tool for measuring the economic benefits of art in Minneapolis, the system has some limitations. It relies is heavily on business transactions and employment, and does not capture non-commerce related impacts like community cohesion and safety, feeling of well being, expressions of identity or rates of attendance. Also not captured in the measurement are nonprofit organizations with annual budgets under $25,000 or demographic traits like race, age or gender. As looking for arts funding has become more competitive, proving the impact of the arts remains a difficult but crucial part of arts advocacy.

Minneapolis plans on releasing core CVI data annually, with a full report to be published bi-annually.

It’s time to tell The McKnight Foundation about your favorite artists — those who you believe have really made an impact in Minnesota. McKnight is accepting nominations for its 16th Distinguished Artist Award, with a $50,000 prize for the winner.

Annually the award honors one artist who has had a substantial impact on the arts in Minnesota over his or her lifetime. Artists in all disciplines—including ceramics, dance, film, literature, music, theater and visual arts—may be nominated.

After nominations are received, a panel with representatives from a variety of artistic disciplines who are well versed in the history of the arts in Minnesota reviews nominations and recommends a candidate to the foundation’s board of directors. Considerations include the quality of an artist’s work, the artist’s commitment to his or her field and ways the artist has enriched life for audiences and the community.

Penumbra is the largest theater representing African American experiences in the Twin Cities

A recent Minnesota Public Radio (MPR) piece examines the unique fundraising challenges faced by culturally specific and ethnic theater groups. These theaters present work by and about particular groups. Two local examples are Mu Performing Arts, representing Asian American experiences, and Penumbra Theater, representing African American experiences.

As art funding starts to rebound, most individual donors continue to support large, culturally western groups serving audiences who are whiter and wealthier than the American average. This trend, along with the reduction of foundation, government and corporate support for theater, has placed many culturally specific theaters in jeopardy. To survive, small arts groups must expand revenue sources, diversify funding and do a better job of networking with individual donors.

As Minnesota’s population diversifies, engaging diverse individual donors continues to be a challenge. According to MPR and Michael Kaiser, president of the Kennedy Center for Performing Arts, the average white theater company gets 60% of its funding from individual donors. That compares to (less than) 26% of funding that Penumbra receives from individuals. Two factors are cited as contributing to the gap: available wealth in the theater’s community and the history of philanthropy within the culture.

Another factor contributing to the decline is the diversification of offerings from mainstream theaters. As large theaters start to embrace multicultural programming, they attract support that may traditionally have gone to small ethnic theaters, which may have trouble competing for grants against large, more established groups. And, even with a shift toward more mainstream multicultural theater, criticism about a lack of representation from women and communities of color on America’s stages continues, as a backlash against the Guthrie’s 2012-2013 season showed.

However, Penumbra has also demonstrated that there is hope for building and diversifying fundraising capacity. After cutting staff and suspending programming indefinitely as a result of a major 2012 budget short fall, Penumbra focused all its energy on raising the $340,000 needed to keep its doors open. According to MPR, by the end of 2012, the theater had raised $359,000 from more than 1,400 individuals, corporations and foundations. To grow future sustainability, Penumbra is now developing a new business plan and examining ways to maximize revenue streams.

Culturally specific theaters are worth supporting. They provide ethnic and minority communities with a place to express their cultures using their voices. In addition, they bring another group’s individual and shared experiences to broader audiences. Funding diversification is key to making these theaters sustainable.